Pakistan is a high risk country because of its unstable security situation. However, due to the country’s vast population, there is significant potential for a sizeable market for consumer-orientated businesses as the purchasing power of individuals improves. Pakistan's close geopolitical ties with China should also ensure that it benefits from China's rise, through growing trade and investment.
We keep our clients informed of the latest market moves and political developments in Pakistan, as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 16 of Pakistan’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert research teams. We aim to keep you one step ahead, so you can operate with confidence in Pakistan.
Pakistan Country Risk
The March 27 attack in the Punjab capital of Lahore is a major blow to the government's hitherto progress in the fight against domestic terrorism. While terrorist activity remains on downtrend, the latest attack will be a blow to the county's overall business environment as the government seeks to attract foreign investment amid its somewhat stalled economic reform and privatisation drive.
With the help of reduced oil import costs and increased remittances, Pakistan is seeing an increase in its savings rate, supporting an increase in investment. The textile and automotive sectors appear set to be the main beneficiaries of these trends, although the recent Lahore terror attacks pose a risk to business confidence.
While we continue to see slight weakness in the Pakistani rupee over the course of 2016, this weakness...
Pakistan Operational Risk Coverage (9)
Pakistan Operational Risk
Pakistan Operational Risk
BMI View: Pakistan is a regional and global underperformer on the BMI Operational Risk Index and investors are faced with significant economic, governance and security challenges that create an uncompetitive environment. Pervasive corruption and lack of transparency continues to raise legal risks and drive up operational costs - affecting all levels of the government and judicial system. Political and military interference in the economy and within the inefficient judicial system is also prevalent. We highlight that...
Pakistan Crime & Security
Pakistan Crime & Security
BMI View: Severe and pervasive security risks pose a significant deterrent to investment in Pakistan. Despite a strong and politically influential military, the absence of the state is a problem in many regions, allowing criminal and terrorist activity to flourish and pose multiple security threats to businesses. The most pertinent risks stem from the potential for terrorist attacks, which may target foreign workers and businesses, and frequently occur throughout the country. Sectarian violence and communal strife further adds to the climate of insecurity, while criminal organisations are the main source of a range of illicit activities which affect legitimate businesses, including extortion, kidnapping, armed robbery, money laundering, production of counterfeit goods and corruption. Finally, cyber crime is an increasing concern, and attempts by the government to improve online security have largely been counter-...
Pakistan Labour Market
Pakistan Labour Market
BMI View: Investors in Pakistan are presented with considerable risks when it comes to the country's labour market. Years of neglect mean that the education system is failing, with low enrolment and attendance rates resulting in a lack of basic skills among the majority of the workforce. Despite the large working age population in the country, availability of labour is restricted due to a low level of female participation and poor general health reflected in the low life expectancy in Pakistan. These factors largely offset the potential benefits of a competitive minimum wage and flexible labour market conditions. Overall, Pakistan receives a score of 40.9 out of 100 for Labour Market Risk, which places the country 34th...
BMI View: Businesses operating in Pakistan will face considerable challenges when it comes to logistics. Although the country offers competitive electricity and fuel costs, interruptions to supply are frequent, which is a deterrent for heavy power users and Pakistan is facing a severe water shortage. The costs of importing and exporting are relatively low; however this benefit is offset by the long lead times caused by the weak internal transport infrastructure in Pakistan. While Pakistan does offer enormous growth potential, at present it does not have the infrastructure to match and as a result the country has a score of 47.6 out of 100 on the BMI Logistics Risk Index. This puts Pakistan in 19...
Pakistan Trade & Investment
Pakistan Trade & Investment
Trade and investment risks are very high in Pakistan owing to the country's high fiscal and trade barriers and the extent of red tape plaguing its bureaucracy. Compounded by the volatile domestic security situation, foreign investment outflow in recent years has slowed, a trend we expect to continue in the foreseeable future. That said, the country's developed banking system provides good access to international financial markets. For these reasons, the country has an overall score of 29.5 out of 100 for Trade and Investment, putting it in 24th position out of 30 countries in Asia.
Following a sharp rise in foreign direct investment (FDI) in Pakistan from the mid-1990s to the mid-2000s, since 2008 it has slowed significantly, and currently accounts for just 11.8% of Pakistan's total GDP. For the most part, inconsistent economic policies, high fiscal and trade barriers, high corporate tax rates and poor infrastructure are responsible for this...
Pakistan Industry Coverage (16)
BMI View: We take a cautious view of the prospects for the Pakistani agribusiness sector. There are numerous challenges facing producers of all commodities covered by this report, chief among them a dire security situation, erratic power supply, lack of available finance and vulnerability to extreme weather events. Nevertheless, the government has taken some positive steps to improve the availability of higher-quality seeds for rice, wheat and corn, which should raise yields in the medium term. We also note that there have been recent positive developments in the country's energy sector that, if sustained, could prove beneficial for cotton and rice producers in particular....
BMI View: We believe demand momentum for Pakistan's auto sector will remain strong in FY2015/16, and forecast vehicle sales to grow by 18.2%. The positive outlook is underpinned by favourable monetary conditions, which will help to lower credit costs for potential car buyers, while the government's taxi scheme will also continue to spur demand momentum over the coming quarters.
|Passenger Car and Light Commercial Vehicle Sales|
|f = BMI forecast. Source: PAMA, BMI|
Pakistan Commercial Banking
|Date||Total assets||Client loans||Bond portfolio||Other||Liabilities and capital||Capital||Client deposits...|
Pakistan Consumer Electronics
BMI View: Pakistan's consumer electronics market presents many operating challenges to vendors and is a regional laggard in terms of device spending per capita and penetration rates - but we believe it is moving to a stronger growth trajectory as several positive trends converge. The rollout of 3G services and supply of cheap smartphones saw a handset spending boom take-off in 2014-2015, while rising incomes and increased local production are positive for the PC market. At the same time investments in retail and distribution are formalising operations and all these factors underpin our view that vendors grow revenues by driving up penetration rates over 2016-2020, a period during which we forecast total device spending will grow at a CAGR of 9.1%. This will make Pakistan a regional outperformer in device spending growth as markets in East Asia decelerate due to increasing saturation....
Defence & Security
Pakistan Defence & Security
BMI View: The state-dominated Pakistani defence industry still lacks advanced design and development capabilities in most segments, which means that the country remains heavily reliant on foreign partners to meet its armed forces' requirements. However, joint ventures with China have allowed local manufacturers to benefit from technology transfer in recent years, and tanks, combat aircraft and armed UAVs are now produced in-country. As a result, Pakistani defence exports are rising - particularly to developing countries looking for affordable equipment. Islamabad is under pressure to maintain defence expenditure growth, as the government must keep powerful military officials satisfied in order to ensure political stability, amid an...
Food & Drink
Pakistan Food & Drink
BMI View: Pakistan will be the lowest ranking within the Asia Pacific region owing to high operational and security risks. Investment in the MGR sector will be the most affected, with very limited international players, which leaves the formal retail industry highly underdeveloped. The food and beverage segment will experience more positive investment, benefiting from growing household spending and a large consumer base on the back of increased spending on essential foods.
|Food and Drink Spending|
Pakistan Freight Transport
The freight mix in Pakistan is set to perform moderately in both the short and medium term, with growth constricted somewhat by the parlous state of many integral economies at present. Also, domestic strife, such as the road blockade in Punjab in August 2014, has had a detrimental effect on freight output and such scenarios could flare up again into 2015.
Export cargo worth USD600mn came to a standstill in August 2014 due to a road blockade in the province of Punjab, according to exporters and shipping line sources and reported by Business Recorder. The tussle between the Pakistani government and opposition political parties - Pakistan Tehreek-e-Insaf and Pakistan Awami Tehrik - has resulted in a virtual collapse to businesses, trade, social and exports activities in the province. This could have a significant detrimental impact on the Pakistan freight industry should further blockades take place going forward.
BMI View: Pakistan's construction sector continues to face major headwinds. Widespread corruption, lack of protection for property owners and limited government spending are all hampering growth, as is the worsening security situation which continues to deter potential foreign investors. The country's growth potential is substantial - transport, utilities and social/residential infrastructure are suffering from years of underinvestment and Pakistan's large labour pool and extensive natural resources mean that, should the investment environment improve, growth could be rapid. At present, however, this potential is unlikely to be realised and growth will remain subdued.
Forecasts and Latest Updates
Chinese President Xi Jinping has signed an...
BMI View : As of late 2015, the most recent reports from the insurance companies themselves indicate that trends are favourable across most sub-sectors of the non-life segment. The strong premiums growth of private sector life insurance companies through H115, suggest that the risks to our forecasts for that segment are very much to the upside.
Latest Updates And Forecasts
The leading players in both the non-life and the life segments of Pakistan's insurance sector are well- established and have the strengths to cope with a notoriously challenging business environment. In both segments, the players have achieved good growth in premiums and profits through H115.
Recent news indicates that non-life premiums should increase by 12% in 2015. We anticipate that premiums will rise by just under 10%...
Pakistan Medical Devices
BMI View: The Pakistan medical device market is small for a country its size.Domestic production is limited primarilytosteel surgical instruments and the majority of the market is supplied byimports.We are projecting a lower US dollar2014-2019CAGR growth rate of around 2%. The devaluation of the localcurrency against the US dollar will result in a comparatively lower growth rate during the forecast period.
|Total (USDmn)||Per Capita (USD)...|
Oil & Gas
Pakistan Oil & Gas
BMI View: Greater availability of gas supplies via LNG imports and expanding pipeline gas trades with regional suppliers will allow Pakistan's gas imports to grow steadily over the coming years. The country will remain a substantial net importer of crude oil and refined fuels, as domestic production prove increasingly insufficient to offset rising demand.
Pharmaceuticals & Healthcare
Pakistan Pharmaceuticals & Healthcare
BMI View: A challenging business environment will perpetuate the fragmented and underdeveloped pharmaceutical market in Pakistan. Patent protection in the country is poor, dissuading local firms from investing into research and multinational drugmakers from launching new innovative treatments in the country. Moreover, the country has a tough pricing environment and an equally challenging distribution system which will continue to hinder the growth of pharmaceutical firms. Consequently, Pakistan-based drugmakers will focus on overseas markets where higher margins present stronger opportunities for growth.
Headline Expenditure Projections
Pharmaceuticals: PKR252bn (USD2.4bn) in 2015 to PRK273bn (USD2.5bn) 2016; +8.2%in local currency terms and +5.1% in US dollar terms.
BMI View : A lack of generation capacity, insufficient investment, as well as fuel and water shortages have narrowed the supply/demand margin considerably, negatively impacting economic activity across Pakistan. Supply shortages will be a dominant theme clouding Pakistan's power sector over the near term. Over the medium- to long term, the incorporation of non-hydro renewables into the electricity mix, the surge in coal-fired power generation - and consequently the significant decline in oil-fired power generation - will be the key market dynamics.
Latest Updates And Structural Trends
Progress in the...
Pakistan Real Estate
BMI View: The economy is performing well, with a series of positive developments over 2014 and 2015. These include governmental reforms that have reduced political tensions through the dilution of power and development of a more transparent business environment. We believe these improvements, along with the China-Pakistan Economic Corridor (CPEC) project, will spur investment in the commercial real estate market. However, regional tensions, security risks and low GDP per capita limit the market's growth potential.
We forecast real GDP growth y-o-y to remain above 4% between 2016 and 2020, indicating stability in the broader economy. However, operational risk is still a key issue, with concerns over security and corruption continuing to affect the level of investment into the country. Other issues that damage investor confidence include inadequate power supplies and transport...
BMI View: BMI forecasts healthy growth at Pakistan's two major ports, both based around the largest city in the country, Karachi. Both the Port of Karachi and the Port of Muhammad Bin Qasim are set to post positive growth in 2016 and throughout the rest of our forecast in the medium term to 2019. While growth will plateau at steady rates at both ports, the Port of Muhammad Bin Qasim will see more robust growth than that of the Port of Karachi, particularly in terms of container throughput. We forecast that Pakistan will see comfortable macroeconomic growth over our short- and medium-term forecast period, and highlight that the country's efforts to diversify trade out of its current core trade partners could pay dividends to the shipping sector in particular in the long term.
Both Major Ports To See Growth In 2016...
BMI View: Consolidation in the mobile market - with Mobilink set to acquire Warid - puts pressure on the remaining players, particularly CMPak ( Zong ), which has few strategic options other than proceeding with its USD1bn investment in its mobile-only business. The deal would not create an excessively-powerful player, but renewed price competition is expected and the negative impact on ARPUs can only be offset by increased uptake of premium services. This will be difficult in the prepaid-centric market, but the merger will at least motivate reviews of current business strategies.
|Fast 3G/4G Adoption to Continue|